Red flags are signs of danger to brokerage firms and agencies, and also to their business customers.  By learning about the new FTC Rule, agents and brokers can help business policyholders ensure that their risk management and insurance plans include protection against identity theft and similar losses caused by security breaches.

 Data security is more than a legal concern; it’s also an important customer satisfaction and public relations issue.  Imagine having to sign letters to valued customers, telling them that their funds and privacy are at risk because of a missing flash drive.  Some firms proactively work with potentially impacted customers after a data loss and contact credit bureaus to help protect against damage caused by identity theft.

 Data breaches routinely result in lawsuits, and compliance with the Red Flags Rule is the first step in proving that a business was not negligent.  Failure to comply, on the other hand, may be used as evidence that the business failed to meet established federal regulations for safekeeping personally identifiable data.  Litigation outcomes may be strongly impacted by whether a business is, or is not, in compliance with the Red Flags Rule.

(This article originally appeared on the American Agent & Broker website.  The authors are Louie Castoria and Lori Nugent, both attorneys at the law firm of Wilson Elser Moskowitz Edelman & Dicker LLP.)